Gold Surges, Within 'Inhaling' Distance of $1,400

Gold surges as new home sales plummet. Analysts see $1,400 level attainable.

NEW YORK ( TheStreet) -- Gold prices were rushing toward $1,400 as a brutal new-home sales report rallied traders to the safe-haven asset.

Gold for December delivery at the COMEX division of the New York Mercantile Exchange was surging $24.60 to $1,395.40 an ounce. The gold price traded as high as $1,397.30 and as low as $1,367.80 an ounce, while the spot price was adding $17.74.

Home sales were down 13% putting a shadow on the recovery and the overall economy, Thomas Power, senior commodities broker at RJO Futures, said in a phone call from Chicago.

The Census Bureau reported new home sales in July fell to 394,000 from the prior month's 455,000. Economists polled by Thomson Reuters were expecting a seasonally adjusted annual rate of 490,000 in July.

Paired with pent-up physical demand in Asia and backwardation in COMEX gold futures contracts, the yellow metal could close above $1,400 an ounce on Friday for the first time since May 14.

"We're within inhaling distance of $1,400," George Gero, precious metals analyst at RBC Capital Markets, said on the phone from New York.

When asked if gold would close higher than $1,400 on Friday, Power said "yes," and added that if the precious metal closes above $1,420 on one of the next few trading sessions then the market could see a test for $1,500 -- a level not seen since April, when gold witnessed a historic two-day collapse.

Gero, however, was less optimistic: "The question is will the rally continue, because it's Friday and Friday rallies are often met with profit-taking in the afternoon."

One of the biggest laggards in the sector was Gold Fields ( GFI), which was dropping more than 4% for the second day in a row following weaker-than-expected second-quarter earnings and ending its dividend.